Accounts Payable Automation: Thinking Outside the ERP1 Sep, 2012 By: Renee Thomas, Esker Americas imageSource
The economic whirlwind of the past few years has forced even the savviest of companies to rethink how and where their money is spent. Increasingly, the microscope is being placed on internal back-office processes, seen as prime candidates for strategic cost-cutting initiatives. Perhaps unsurprisingly to many who work within that department, Accounts Payable (AP) has emerged as an area ripe for improvement.
Most companies running enterprise resource planning (ERP) systems are all-too-familiar with the challenges of conventional paper-based AP processes that saddle AP staff from focusing on its primary tasks (e.g., accurate and timely closing, avoiding late payments, etc.). Although ERP platforms are effective tools for archiving critical business data, most simply lack the capability to support the processes of each invoice transaction (e.g., receipt, review, approval, etc.). As a result, these repetitive tasks are often done through manual human intervention. Visibility and productivity remain low while error rates go up. What’s more, financial planning, vendor relationships & regulatory compliance efforts can suffer.
Rather than adding headcount or additional infrastructure, more and more forward-thinking companies are stemming the negative effects of paper-centric processes by leveraging automation solutions.
The emergence of automated AP workflow - Automated workflow is not a new concept. In the AP arena, however, it has long been regarded (and proven) to be an under-utilized technological solution. A 2012 study by The Institute of Financial Operations found that the majority (39%) of the 100 AP professionals surveyed say that paper-based invoices still make up 90% or more of their total volume.1 However, with the need to maximize operational functionality at an all-time high, and more customized solutions available, the treasure-trove of potential in electronic workflow is rapidly gaining attention. Results from the same 2012 study indicate that, when asked, “Do you use a workflow solution?” the majority (nearly half) of the respondents said, “Yes.” (Ref: 1 Crowley, L., & Sears, D. (2012). 2012 AP Cloud Study. The Institute of Financial Operations).
Clearly, AP automation is on the rise; the question is how to best implement it. Before evaluating AP automation solution providers, controllers, finance managers and others in the AP department must explore a number of key considerations; namely, the choice between installing a tool inside the ERP system or using a certified solution with data recognition, validation and workflow that resides outside the ERP system.
One company; one ERP system? Not so fast. On the surface a solution that runs AP workflow inside the ERP system seems like the most reasoned & practical approach. In reality, this type of one-to-one relationship does not accurately reflect the complex, multi-connected global persona of today’s business industry & and can lead to dysfunction down the road.
Many of today’s companies achieve their growth by acquiring or merging with other companies, each with their own separate IT systems. This often leads to an impossibly diverse ERP landscape made up of vastly different systems, architectures and data formats—it’s not unheard-of for a company to have as many as five ERP systems in use across a global enterprise. Plus, not all ERP systems have workflow engines, and success in modifying the application code to automate AP is not guaranteed.
What are the options? Some companies install an AP workflow tool inside one ERP application. While this may be a compatible solution for a select few, companies running several ERP systems within the organization must still maintain “inside workflow” in each instance. It’s only a matter of time before additional costs and consistency issues rear their ugly heads. Running a variation of an ERP system is another option that sounds good in theory; but though they’re all based on the same platform each system can be different enough to require special attention due to a different picture at the operational level. Even if a company has standardized on an enterprise-wide ERP solution, multiple instances in different locations around the world can require integration of multiple workflow tools in order to automate AP workflow, complicating initiatives such as setup of shared services centers.
Why “inside ERP” invoice processing falls short - There is a misconception that, because all actions can be performed from within the ERP interface, “inside ERP” workflow is a more streamlined and effective solution. However, this does not reflect the multitude of problems that many companies face in reality.
The problem of access - Inside ERP processing can impede the ability of some users to perform their daily tasks. Storing an invoice inside the ERP provides access to the document, yes, but only select, high-ranking team members have access to all of the information needed to decipher how an invoice was approved, whether signatures were received, or whether instructions were followed correctly. Unlike ERP-independent solutions, it’s difficult to configure the options & resources shared by all of the users so that usability & visibility are maximized while still protecting security; especially when working remotely or traveling where users may prefer to not use the ERP interface for AP workflow altogether. It’s more efficient for them to use a mobile device to check and approve invoices, especially if it’s a web-based application that doesn’t require incremental ERP licensing costs to approve invoices through the ERP interface.
The problem of complexity - Opening up your ERP system to add AP workflow automation is not as easy as 1-2-3—with it comes a significant amount of costs, risks and complexities. More often than not, solutions that function within the ERP environment require a major investment of time and money for installation, integration and maintenance by ERP application engineers.
The problem of flexibility - Solutions that are developed to operate within the ERP environment are, by nature, limited in their ability to integrate with multiple systems.
The problem of performance – With an IT landscape that is constantly evolving, it’s critical to integrate AP workflow automation at a level that maintains ERP system integrity while performing seamlessly. Tools that operate within the ERP environment have a habit of tapping system resources allocated to core ERP applications & other enterprise systems. The impact is multiplied as companies add systems through mergers & acquisitions, and as additional staff requires more resources.
The problem of recognition - While the part of the “inside ERP” process that extracts data from sources (paper invoices, email, faxes, EDI, etc.) resides outside of the ERP system, approval workflow is done inside, creating a break in the end-to-end audit trail. Plus, instead of validating recognition & initiating the workflow from the same screen, AP personnel have the burden of dealing with 2 different applications & interfaces.
Thinking outside of the ERP for streamlined workflow - To avoid opening the proverbial can of worms associated with inside ERP workflow, companies often take an external approach to automation. An ERP-independent solution—like the Esker AP Automation Solution—enables integration in heterogeneous ERP landscapes without the time, cost and risk involved in trying to implement a tool within their ERP application(s), and promotes a host of potential advantages.
Access anytime, anywhere - External AP workflow gives buyers and managers an email notification when invoices need to be approved. In addition, they can check, comment on, add to, reject or sign off on invoices 24/7, worldwide. Web-based workflow offers the ability to create a matrix for automation of the approval process, including support for non-ERP systems and mobile devices.
User friendly - One of the most common reasons for failure of business process automation projects is due to confusion, errors and user rejection. Users who are unfamiliar with ERP applications may not readily embrace the ERP interface due to its complexity and uniqueness. Fortunately, easy deployment via the web browser and a familiar environment helps to simplify training and promote user acceptance in external AP workflow.
Visibility and control - Workflow outside the ERP allows users to access info to when approving an invoice, without the need to be an ERP application user. This reduces the need to add ERP seats in the execution of an AP automation project. Users have a single access point for invoice data along with the original document image & a history of actions.Stability for invoice processing & consolidation for shared services support are also key areas addressed in “Outside the ERP” workflow.